1Q22 profitability impacted mainly by accelerated inflation and early retirement charges related to transformation and efficiency programs. Continued improvement in AR$ NIM up 70 bps QoQ

Grupo Supervielle S.A. (NYSE: SUPV; BYMA: SUPV), (“Supervielle” or the “Company”), a universal financial services group headquartered in Argentina with a nationwide presence, today reported results for the three-month period ended March 31, 2022.

Starting 1Q20, the Company began reporting results applying Hyperinflation Accounting, in accordance with IFRS rule IAS 29 (“IAS 29”) as established by the Central Bank.

Management Commentary

Commenting on first quarter 2022 results, Patricio Supervielle, Grupo Supervielle's Chairman & CEO, noted:

“We delivered a 90 basis point sequential increase in net interest margin during the first quarter, reflecting mainly higher yields for both our loan book and Central Bank securities held in our investment portfolio. The Bank subsidiary, on a stand-alone basis, reported positive ROAE while we continue to advance our digitalization strategy creating a more agile and efficient customer centric operation. At IUDÚ, results were affected by higher inflation and loan loss provisions coupled with a deep reduction in personnel.

“Seasonally weak loan demand this quarter, particularly in Factoring where we maintain a higher share, was compounded by accelerated inflation that eroded consumers´ purchasing power and by corporates with strong cash positions. Loan origination at IUDÚ was also significantly lower as we tightened credit standards. In contrast, we reported a sequential increase in our deposit base, following liability management on the back of higher interest rates.”

“Reflecting our focus on minimizing credit risk, asset quality remained stable sequentially, both at our Bank subsidiary and IUDÚ, with the total NPL ratio unchanged at 4.3%. Bank NPLs stood at 2.6% in the quarter at comfortable asset quality levels.”

“Looking ahead, we expect to see GDP for the year expanding in the low single digits mainly due to a statistical carry-over effect from last year´s economic rebound. Further, while the government´s recently signed agreement with the IMF was a positive development, which requires the backing of political consensus to implement it. We continue to cautiously monitor current dynamics in our markets.”

“In this context, we remain relentlessly focused on executing on capturing efficiencies and scaling our digital customer base, as we strengthen our franchise through investments in data analytics and value-added initiatives. Accordingly, we continue attracting digital customers with good fundamentals as we ramp up monthly customer acquisition. Importantly, our solid capital position which is hedged against inflation through real estate investments, mortgages, and sovereign bonds, provides a robust foundation to weather the current environment as we look to a more positive macro scenario in the future,” concluded Mr. Supervielle.

First quarter 2022 Highlights

Attributable Net loss of AR$377.6 million in 1Q22, compared to a net gain of AR$293.6 million in 1Q21 and a net loss of AR$770.7 million in 4Q21.

Excluding non-recurring severance charges, Supervielle would have delivered net income of AR$445.6 million in 1Q22, with adjusted ROAE in real terms at approximately 2.9%, compared to 0% in previous quarter.

During 1Q22 Banco Supervielle on a stand-alone basis excluding its participation in IUDÚ, reported a Net Income of AR$ 791.5 million, improving AR$887.0 from the loss of AR$ 95.5 million reported in 4Q21.

ROAE was negative 2.5% in 1Q22 compared with positive 1.8% in 1Q21 and negative 4.9% in 4Q21.

ROAA was negative 0.3% in 1Q22 compared to positive 0.3% in 1Q21 and negative 0.7% in 4Q21.

Loss before income tax of AR$435.6 million in 1Q22 compared to profit before income tax of AR$247.1 million in 1Q21 and loss of AR$115.2 million in 4Q21.

Net Revenues of AR$18.0 billion in 1Q22, compared to AR$18.3 billion in 1Q21 and AR$17.2 billion in 4Q21, down 1.5% YoY and increasing 4.8% QoQ. The YoY performance reflects higher cost of funds impacted by regulatory minimum rates on time deposits, weak credit demand and credit lines granted at subsidized rates, and lower fee income in real terms impacted by inflation. QoQ performance is explained by: (i) a flat Net Financial Margin (+0.3%) and (ii) a decline in other operating expenses as 4Q21 reflected a loss due to the annual revaluation of fixed assets together with higher turnover tax. These were partially offset by lower Net Fee income mainly due to higher commissions paid, while fees from the core business such as Deposit Accounts increased 6.9% in the quarter.

Net Financial Income of AR$16.1 billion in 1Q22 increasing 1.3% YoY and 0.3% QoQ.

The Company’s capital is hedged against inflation through different instruments, including mortgage loans and sovereign bonds which impact net financial income with a 45-day lag; therefore, the positive impact from accelerated inflation in the quarter had a partial effect on net financial income and NIM.

Net Interest Margin (NIM) of 19.2% declined 14 bps YoY and rose 91 bps QoQ. The AR$ NIM was 19.3%, up 22 bps YoY and 70 bps QoQ.

The total NPL ratio was 4.3% in 1Q22 flat from 4Q21, despite the decline in the loan portfolio.

Loan loss provisions (LLP) totaled AR$2.0 billion in 1Q22, decreasing 7.1% YoY, but increasing 4.7% QoQ. Net loan loss provisions, which includes reversed provisions in the quarter, amounted to AR$1.4 billion in 1Q22 compared to AR$1.7 billion in 4Q21.

The Coverage ratio was 107.4% as of March 31, 2022, 109.9% as of December 31, 2021, and 205.2% as of March 31, 2021.

Efficiency ratio was 74.2% in 1Q22, compared to 71.9% in 1Q21 and 76.6% in 4Q21. Excluding severance payments and early retirement charges, the efficiency ratio would have improved to 67.4% in 1Q22 from 69.7% in 4Q21.

Loans to deposits ratio of 48.9% compared to 54.8% as of Mach 31, 2021, and 55.9% as of December 31, 2021. AR$ loans to AR$ deposits ratio was 48.8% as of March 31, 2022, declining from 53.7% as of March 31, 2021, and 56.1% as of December 31, 2021.

Total Deposits of AR$341.3 billion increasing 1.9% QoQ and 2.5% YoY. AR$ deposits amounted to AR$ 310.2 billion, rose 2.9% QoQ and 7.1% YoY

Loans declined 8.5% YoY and 10.8% QoQ in real terms to AR$166.9 billion, while average loan volumes declined 4.2% YoY and 7.6% QoQ. The AR$ Loan portfolio amounted to AR$151.4 billion, declining 2.6% YoY and 10.6% QoQ, while average AR$ loans rose 0.5% YoY and declined 6.6% QoQ.

Common Equity Tier 1 Ratio as of March 31, 2022, was 13.8% improving 110 bps when compared to 4Q21 and remained flat from March 31, 2021.

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